National culture and corporate
governance codes
Sarah A. Humphries and Catherine Whelan
Sarah A. Humphries is
Professor at the
Department of
Information Systems and
Computer Science,
Georgia College & State
University, Milledgeville,
Georgia, USA. Catherine
Whelan is based at the
Department of
Accounting, Georgia
College & State
University, Milledgeville,
Georgia, USA.
Received 1 June 2016
Revised 19 August 2016
Accepted 29 August 2016
PAGE 152 CORPORATE GOVERNANCE
Abstract
Purpose – This study aims to investigate the relationship between national culture and best practices
as recommended in country-level corporate governance codes.
Design/methodology/approach – Measures for four corporate governance variables – board
independence, gender composition, board leadership and meeting frequency – were collected from
corporate governance codes for 55 countries. Scores from Hofstede’s cultural dimensions – power
distance, individualism vs collectivism, masculinity vs femininity and uncertainty avoidance – were
gathered for these same countries. Average scores on the cultural dimensions were compared for
groups of countries based on each of the corporate governance variables.
Findings – Data analyses reveal significant relationships between Hofstede’s cultural dimensions and
the four characteristics of corporate governance examined in this study. Results highlight the
importance of understanding cultural influences on board characteristics for companies considering
international expansions or partnerships.
Originality/value – While prior studies have focused on the influence of national culture at the company
level, this study examines the relationship at the regulatory level through review of country-level
corporate governance codes.
Keywords Corporate governance, Boards of directors, National culture,
Hofstede’s cultural dimensions
Paper type Research paper
Introduction
This study aims to further the body of literature concerning the influences of national culture
on corporate governance. Typically, corporate governance research investigates
corporate governance determinants of firm performance. However, few studies have
attempted to identify the contributions of national culture to corporate governance
structures that would in turn influence performance. Having a better understanding of the
influences of culture may assist multinational firms when establishing corporate boards for
their subsidiaries in other countries. This study assesses the relationship of four cultural
dimensions (power distance [PDI], individualism vs collectivism [IDV], masculinity vs
femininity [MAS] and uncertainty avoidance [UAI]) as identified by Hofstede (1980) to four
corporate governance variables (gender composition, board independence, board
leadership structure and meeting frequency).
Literature review and theory
Hofstede (1991) has argued that the values and organizational structure of corporations are
a reflection of the national culture in which that organization operates. Further, corporate
structures are modeled on the institutional norms (Meyer and Rowan, 1977) reflected in a
particular society. These norms represent a shared belief system that comes about from the
shared culture of that society. Therefore, corporate governance codes are a reflection of
the institutional environment within which they are developed (Licht, 2001; Aguilera and
VOL. 17 NO. 1 2017, pp. 152-163, © Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-06-2016-0127
Jackson, 2010; Terjesen et al., 2015). This institutional environment includes such things as
the political system, capital market, labor market and legal system, all of which are
influenced by societal norms. As such, the composition and structure of corporate
governance boards should reflect the prevailing cultural influences found in that society.
This application of institutional theory (DiMaggio and Powell, 1983) was used by Li and
Harrison (2008a and 2008b) to develop and test their hypotheses that institutional norms for
board structure are influenced by national culture. Additionally, Hermes et al. (2007)
showed that in seven Eastern European countries, “the contents of codes of countries to a
greater or lesser extent are shaped by domestic forces related to country-specific
characteristics of corporate governance systems (pg. 71)”.
Hofstede (1980), based on his extensive collection of corporate cultural data from 44
countries, described four cultural dimensions that could serve as a basis of comparison
from culture to culture. These four dimensions are PDI, IDV, MAS and UAI. Power distance
refers the tolerance and acceptance of inequality in the distribution of power. In
individualistic cultures, individuals make decisions for themselves based on what is best for
them. In collective cultures, groups make decisions for individuals or individuals make
decisions that will benefit the group, not necessarily themselves. Masculine cultures value
assertiveness, competiveness and material success with distinct gender role differences.
Feminine cultures value co-operation, harmony and long-term relationships with both
genders valuing quality of life (Varner and Beamer, 2008). Uncertainty avoidance results in
behavior that is designed to minimize unforeseen consequences, whereas uncertainty
tolerance results in behavior that is less concerned with the unknown. Hofstede (1991) and
Hickson and Pugh (1995) have found relationships between these dimensions and
organizational behavior. More specifically, these researchers found that high PDI scores
were associated with strong authorities and hierarchies, and that uncertainty avoidant
cultures prefer clear organizational procedures and rules.
Effective monitoring of management through good corporate governance practices is
important to the stability of financial markets. “Good” corporate governance is not easily
defined. Many countries have established codes detailing best practices, but no definitive
set of guidelines has emerged. This may be in part because of the cultural influences within
each country. Accounting research examining corporate governance has traditionally
focused on the impact of corporate governance attributes on firm performance (Daily and
Dalton, 1993; Yermack, 1996; Bhagat and Black, 1999; Dalton et al., 1999; Ellstrand et al.,
1999; Klein, 2002; Gompers et al., 2003). Attributes examined include board
independence, gender diversity, board size, leadership structure, director competence,
existence of committees, committee independence and frequency of meetings.
Examination of the influence of culture on corporate governance has primarily taken place
at the company level. Li and Harrison (2008a), using a sample of 399 multinational
manufacturing firms based in 15 countries, investigated the influence of cultural
dimensions as described by Hofstede (1980) on corporate governance structure. Their
sample was taken from a larger work (Stafford and Purkis, 1989) based on data collected
during 1987. They found that the cultural dimensions of PDI, IDV, MAS and UAI predicted
the composition and leadership structure of corporate boards in different cultures. The two
dependent measures in the study were percentage of outside board directors (board
independence) and the presence of consolidated board leadership (chief executive officer
[CEO] as Board Chair).
Carrasco et al. (2015) looked specifically at the appointment of women to corporate boards
to investigate whether a cultural bias exists. They gathered data from 7,302 boards from 32
countries to test whether there were cultural implications using Hofstede’s four major
dimensions. Their results indicated two dimensions, PDI and MAS, effected the percentage
of women on boards (PWOB). PDI was negatively related to PWOB. In higher PDI cultures,

VOL. 17 NO. 1 2017 CORPORATE GOVERNANCE PAGE 153

 gender would not even be considered because of the perception of inequality between
men and women. Similarly, masculinity was negatively related to PWOB as gender roles are
very pronounced in high masculine countries and deviations are rarely tolerated.
Chan and Chueng (2012) found that Hofstede’s cultural dimensions assist in explaining the
differences in corporate governance practices at the firm level. They examined 271 firms
across 12 countries using the concept of ethical sensitivity which they relate directly to
corporate governance practices. It has also been shown that the institutional environment
mediates the relationship between national culture and corporate governance practices
(Daniel et al., 2012). Consequently, development and implementation of corporate
governance best practices should take national culture into consideration to enhance
effectiveness.
While prior studies have focused on the influence of national culture on corporate
governance at the company level (Carrasco et al., 2015; Chan and Chueng, 2012; Daniel
et al., 2012; Li and Harrison, 2008a), this study examines the relationship at the regulatory
level through a review of country-level corporate governance codes. The codes typically
follow a “comply or explain” approach. A company is not required to comply with the
recommendations in the code; however, they must provide an explanation of any
non-compliance. There is an expectation that the explanation would provide insight into
how the alternative approach would enhance corporate governance effectiveness for that
specific company. This approach recognizes that a one-size-fits-all requirement may not
be the most effective.

Hypothesis development
This study assesses the relationship of four national cultural dimensions – PDI, IDV, MAS
and UAI – to four corporate governance variables, board independence, gender
composition, CEO duality and meeting frequency.

Power distance
PDI is defined by Hofstede (1980) as “the extent to which the less powerful members of
institutions and organizations within a country expect and accept that power is distributed
unequally”. In a business context, this can be interpreted as an acceptance of a
hierarchical structure in which power is concentrated in the hands of a few.
Gender: In high PDI cultures, a recommendation regarding gender composition on the
board of directors would not be deemed necessary, as it is believed that everyone knows
their place and is in their place. Traditional gender roles would indicate women would not
be well represented on corporate boards. Thus, it is unlikely that gender would even be
mentioned in the corporate governance codes of high PDI cultures. Carrasco et al. (2015)
found that the proportion of women on corporate boards was lower in high PDI countries,
possibly because of the lack of regulatory requirements:
H1A. The higher the power distance score, the less likely there would be a requirement
relating to the gender composition of the board.
Board independence: In high PDI cultures, independence of the directors would be seen
as less important because of the acceptance and expectation of a concentration of power.
However, Li and Harrison (2008a) found that in high PDI countries, there were more
outside board members. This result is likely because of the need to minimize subordinate
contributions in a formal corporate structure. Requiring board independence would not
be important in high PDI cultures, as expert opinions would be sought over subordinate
opinions:
H1B. The higher the power distance score, the less likely there would be a requirement
to have a majority of independent directors on the board.

PAGE 154 CORPORATE GOVERNANCE VOL. 17 NO. 1 2017

CEO duality: In high PDI cultures, there is an acceptance of power concentration. Li and
Harrison (2008a, 2008b) concluded that high PDI societies are more likely to have
consolidated power concentration with the same individual serving as the CEO and Board
Chair. Therefore, it is expected that the corporate governance codes in high PDI countries
would not require separation of these roles:
H1C. The higher the power distance score, the less likely there would be a requirement
to separate the roles of CEO and Board Chair.
Board meetings: In high PDI cultures, there is an expectation of structure within
organizations. Prescribing the frequency or number of board meetings would be viewed as
enhancing the structure and organizational efficiency of the corporate board. This would
demonstrate that the board is providing necessary oversight of the activities of the
company:
H1D. The higher the PDI score, the more likely the corporate governance code would
recommend board meeting frequency.

Individualism vs collectivism
The fundamental issue addressed by the individualism dimension is “the degree of
interdependence a society maintains among its members” (Hofstede, 1980). In a highly
individualistic culture, the focus is on decisions that benefit the individual rather than the
group. In a business context, the group in question can be viewed as the stakeholders of
the company. Freeman (1984) defined stakeholders as those who can affect or are affected
by the achievement of the organization’s objectives. Therefore, consideration should be
given to the signal that is sent to the various stakeholders to assure them that their concerns
are being addressed through the corporate governance mechanisms.
Gender: In high individualism cultures, a board would appear to be more legitimate if it
represented the interests of a broader range of individuals or stakeholders. Consequently,
gender diversity would be seen as an important consideration in board composition:
H2A. The higher the individualism vs collectivism score, the more likely there would be
a requirement relating to the gender composition of the board.
Board independence: In high individualism cultures, the legitimacy of the board would be
enhanced through greater diversity because more individual perspectives would be taken
into account. This could be achieved through a larger proportion of outside directors as
was found in Li and Harrison’s (2008b) research:
H2B. The higher the individualism vs collectivism score, the more likely there would be
a requirement to have a majority of independent directors on the board.
CEO duality: In high individualism cultures, the desire for a strong signal to stakeholders
would suggest a need for one individual to provide clear leadership. This may result in an
acceptance of the consolidation of the CEO and Board Chair roles. Support for this
hypothesis was found in Li and Harrison’s (2008a, 2008b) research:
H2C. The higher the individualism vs collectivism score, the less likely there would be
a requirement to separate the roles of CEO and Board Chair.
Board meetings: In high individualism cultures, the legitimacy of board work could be
signaled to stakeholders through frequency of meetings. Stakeholders would find it
reassuring to know that the board of directors is meeting frequently and at regular intervals
to provide adequate oversight of the activities of the company:
H2D. The higher the individualism vs collectivism score, the more likely the corporate
governance code would recommend board meeting frequency.

VOL. 17 NO. 1 2017 CORPORATE GOVERNANCE PAGE 155

 Masculinity vs femininity
“The fundamental issue here is what motivates people, wanting to be the best (Masculine) or
liking what you do (Feminine)” (Hofstede, 1980). In a business context, the masculinity
dimension can be interpreted as a focus on competitiveness, success and managerial
decisiveness.
Gender: In high masculinity cultures, gender roles are distinctly set by societal norms. It is
unlikely that gender composition on boards of directors would be a consideration in highly
masculine cultures. Carrasco et al. (2015) found this negative relationship between MAS
and the PWOB of directors:
H3A. The higher the masculinity vs femininity score, the less likely there would be a
requirement relating to the gender composition of the board.
Board independence: In high masculinity cultures, having a larger number of inside
directors on the board would be viewed as enhancing managerial decisiveness. The
presence of independent directors may be viewed as detrimental as these individuals may
not be as well versed in the financial and operational activities of the company.
Independent directors may also be viewed as a potential threat to corporate
competitiveness because of inside information being in the hands of individuals external to
the organization:
H3B. The higher the masculinity vs femininity score, the less likely there would be a
requirement to have a majority of independent directors on the board.
CEO duality: In high masculinity cultures, the desire for managerial decisiveness would
suggest that the combination of the CEO and Board Chair roles would be acceptable. A
separation of the roles would require considerable coordination between two individuals
which could potentially lead to conflict and operational inefficiencies:
H3C. The higher the masculinity vs femininity score, the less likely there would be a
requirement to separate the roles of CEO and Board Chair.
Board meetings: In high masculinity cultures, the structure of having regularly scheduled
board meetings would be viewed as supporting managerial decisiveness and ensuring
organizational competitiveness. If board met infrequently or at irregular intervals, the
effectiveness of company oversight could be called into question:
H3D. The higher the masculinity vs femininity score, the more likely the corporate
governance code would recommend board meeting frequency.

Uncertainty avoidance
UAI is defined by Hofstede (1980) as “the extent to which the members of a culture feel
threatened by ambiguous or unknown situations and have created beliefs and institutions
that try to avoid these situations”. In a business context, this can be interpreted as a desire
to manage uncertainty through rules and policies that minimize ambiguity and enhance
predictability.
Gender: In high UAI cultures, there would be less acceptance of diversity of board
members because of a desire to increase predictability through similarity of thought.
Gender diversity may be viewed as potentially increasing ambiguity, and as a result would
not be encouraged or expected:
H4A. The higher the uncertainty avoidance score, the less likely there would be a
requirement relating to the gender composition of the board.
Board independence: In high UAI cultures, there would be a desire for greater reliance on
experts and specialists, such as executives with intimate knowledge of that company.
Expertise specific to the organization would assist in managing uncertainty. However,
Li and Harrison (2008b) found support for the argument that independent board members

PAGE 156 CORPORATE GOVERNANCE VOL. 17 NO. 1 2017

would provide a broader range of expertise to assist in managing uncertainty.
Consequently, allowing companies to determine their specific needs in terms of director
independence would be the clearest way to reduce ambiguity and uncertainty:
H4B. The higher the uncertainty avoidance score, the less likely there would be a
requirement to have a majority of independent directors on the board.
CEO duality: In high UAI cultures, there would be a desire to have a clear message of
command and an unambiguous decision-making authority. This could manifest in the
combination of the CEO and Board Chair roles as found by Li and Harrison (2008b):
H4C. The higher the uncertainty avoidance score, the less likely there would be a
requirement to separate the roles of CEO and Board Chair.
Board meetings: In high UAI cultures, the desire to reduce ambiguity and increase
predictability would suggest a need to prescribe the frequency or number of board
meetings to ensure that the board is providing the necessary oversight of the company’s
activities:
H4D. The higher the uncertainty avoidance score, the more likely the corporate
governance code would recommend board meeting frequency.

Methodology
Sample
The sample consists of the 55 countries that have corporate governance codes available
in English from the European Corporate Governance Institute website (www.ecgi.org).
Table I provides a breakdown of the regions covered by the countries examined in this
study.

Variables
Corporate governance. Data for the four corporate governance variables was hand
collected from the corporate governance codes found on the European Corporate
Governance Institute website (www.ecgi.org). For each corporate governance variable,
two groups were created for comparison purposes.
The “Gender” variable represents the gender composition of the board of directors. The
first group included all countries with codes that stipulate a requirement or
recommendation for gender balance, gender diversity, a set number of female members or
a set percentage of female members. The second group contained countries with codes
that make no mention of gender composition for the board.
The “Board Independence” variable represents the composition of the board of directors in
terms of independence of the members. The first group included all countries with codes
that stipulate a requirement or recommendation for the majority of board members to be
independent. The second group contained countries with codes that state that a board
should have a sufficient number of independent directors rather than requiring a majority.

Table I Region list

Region Count

Africa 4
Asia 13
Europe (non EU) 7
European Union 21
Middle East 4
North America 2
Oceania 2
South/Central America 2
Total 55

VOL. 17 NO. 1 2017 CORPORATE GOVERNANCE PAGE 157

 The “CEO Duality” variable represents the leadership structure of the board of directors.
The first group included all countries with codes that stipulate a requirement or
recommendation that the roles of CEO and Board Chair should not be filled by the same
individual. The second group contained countries with codes that do not require this
separation.
The “Board Meetings” variable represents the frequency of board meetings. The first group
included all countries with codes that stipulate a requirement or recommendation for the
frequency or number of meetings held each year or that state meetings should be held
regularly. The second group contained countries with codes that make no mention of
meeting frequency.
Cultural dimensions. Data for the scores on the cultural dimensions were hand collected
from the Hofstede Centre website (www.geert-hofstede.com). Scores for the four
Hofstede’s dimensions used in this study (PDI, IDV, MAS and UAI) were gathered for each
of the 55 countries identified above. These scales span the range from 0 to 100 with 50 as
the midlevel. Generally, a score under 50 can be interpreted as relatively low on that scale
and a score over 50 as relatively high. It should be noted that the country scores on the
dimensions are relative and should only be used for comparative purposes.

Method
Countries were placed into one of two groups for each of the corporate governance
variables as described above. The mean score on each cultural dimension was then
calculated for each corporate governance group. A one-tailed t-test was conducted to
examine if there was a significant difference between the mean scores for each group.

Results and discussion

Descriptive statistics
The final sample contained 55 countries from a diverse range of geographical regions.
Table II provides descriptive statistics for each of the cultural dimensions. The measures of
dispersion indicate that there is sufficient variation in the sample to support testing of
differences of the means.

Tests of hypotheses
The overall results indicate that national culture influences the recommendations made for
corporate governance best practices. The significance of the results varies by cultural
dimension and corporate governance measure. Table III provides a summary of the results
from the t-tests conducted to compare the cultural dimension scores with respect to the
corporate governance code recommendations. The table presents the mean score on each
cultural dimension for the two groups created for each corporate governance variable. The
p-value for each t-test is included to indicate whether or not there is a significant difference
between the mean scores for each group.

Table II Descriptive statistics

Individualism vs Masculinity vs Uncertainty
Statistic Power distance collectivism femininity avoidance

Mean 59.64 46.62 46.36 63.87

Median 60 39 49 65
SD 20.79 23.47 19.34 21.99
Minimum 18 14 5 8
Maximum 100 91 95 100
Count 55 55 55 55

PAGE 158 CORPORATE GOVERNANCE VOL. 17 NO. 1 2017

Table III Results of t-tests
Individualism vs Masculinity vs Uncertainty
Dimension/CG measure Power distance collectivism femininity avoidance n

Gender
Gender
recommendations 53.696 52.696 40.696 58.435 23
Gender not mentioned 63.906 42.250 50.438 67.781 32
p-value 0.039** 0.053* 0.033** 0.067*
Board independence
Majority independent 48.583 55.333 40.292 57.792 24
Sufficient independent 68.194 39.871 51.065 68.581 31
p-value 0.000*** 0.009*** 0.022** 0.031**
CEO duality
Separation of CEO/Chair 55.903 48.000 45.032 61.000 31
Separation not required 64.458 44.833 48.083 67.583 24
p-value 0.064* 0.312 0.286 0.148
Board meetings
Recommended
frequency 64.256 45.333 49.718 66.385 39
Frequency not
mentioned 48.375 49.750 38.188 57.750 16
p-value 0.006*** 0.266 0.026** 0.085*
Notes: *; **; ***Significant at 10, 5, 1%, one-tailed respectively

Power distance
The PDI hypotheses hold for all four dimensions of corporate governance. In countries with
high PDI scores, it is less likely that the corporate governance code will make a
recommendation relating to gender composition of the board. Countries with codes that
made no mention of gender have a mean PDI of 53.7 compared to 63.9 for countries with
codes that made reference to gender. The countries requiring a majority of independent
directors have a mean PDI of 48.6, whereas the mean PDI was 68.2 for countries simply
requiring sufficient independence. Thus, a higher PDI score suggests there is a lower
likelihood of there being a requirement to have a majority of independent board members.
Similarly, separation of the roles of CEO and Board Chair is less likely in high PDI cultures
with the mean PDI score of 64.5 for countries that accept CEO duality versus a mean score
of 55.9 for countries requiring separation. In these high PDI cultures, there is a general
acceptance of inequality of power and a hierarchical structure in which power is
concentrated in the hands of a few.
The mean PDI score for countries where meeting frequency was not mentioned is only 48.4
compared to 64.3 for countries with codes that specify meeting frequency. The fact that the
code is more likely to recommend a board meeting frequency or require a minimum
number of meetings per year reflects an expectation of structure within the hierarchy for
high PDI cultures.

Individualism– collectivism
The t-tests provide support for two of the IDV hypotheses. In countries with high IDV scores,
it is more likely that the corporate governance codes will make a recommendation relating
to board composition. This relates to both gender diversity and director independence. The
mean IDV score for countries with gender recommendations in their codes is 52.7 versus
42.3 in countries that make no mention of gender in their codes. Similarly, the mean IDV
score for countries requiring a majority of independent directors is 55.3 compared to only
39.9 for countries specifying a sufficient number should be independent. The legitimacy of

VOL. 17 NO. 1 2017 CORPORATE GOVERNANCE PAGE 159

 the board would be enhanced through greater diversity as this would demonstrate more
individual perspectives being taken into account. This is important in an individualistic
culture, where the focus is on decisions that benefit the individual rather than the group.
Contrary to our expectations and previous research findings (Li and Harrison, 2008b), there
was not a significant relationship between IDV and CEO duality. Consolidation of CEO and
Board Chair would provide clear, strong leadership. However, this concentration of power
could also lead to abuse and possible confusion of roles (Sison, 2000). Similarly, there was
no significant relationship between IDV and meeting frequency, suggesting that other
aspects of corporate governance may provide stakeholders with adequate reassurance
that their individual interests are being addressed.

Masculinity–femininity
Three of the hypotheses for the masculinity–femininity dimension are supported by the
t-tests. As expected, countries with high MAS scores are less likely to have corporate
governance codes that require gender diversity and board independence. Such countries
place significant value on competitiveness, success and managerial decisiveness.
Additionally, gender roles are distinctly set by societal norms. Consequently, high MAS
countries probably would not even consider gender equality as an issue. Countries with
codes that made no mention of gender have a mean MAS score of 40.7 compared to 50.4
for countries with codes that specify some gender recommendations. High MAS cultures
might also see having a majority of independent directors as potentially diluting managerial
decisiveness and undermining competitiveness. This is reflected in the mean MAS score of
51.1 for the countries that simply require a sufficient number of independent directors
versus a mean of 40.3 in countries that require a majority of directors be independent.
High MAS cultures would view established meeting frequency as potentially enhancing
both managerial decisiveness and competitiveness. The mean MAS score for countries
where meeting frequency was not mentioned is only 38.2 compared to 49.7 for countries
with codes that specify meeting frequency. Thus, the higher the MAS score the more likely
the code would recommend board meeting frequency.
Contrary to expectations, there was no significant relationship between MAS and CEO
duality. It was hypothesized that the desire for managerial decisiveness would suggest that
the combination of the CEO and Board Chair roles would be acceptable. While the mean
MAS score was higher for the group of countries that did not require separation of roles, the
difference was not significant.

Uncertainty avoidance
UAI has a significant influence on three of the corporate governance dimensions. The
higher the UAI score for a country, the less likely the corporate governance code would
have requirements for board composition with respect to gender diversity or director
independence. Gender diversity may be seen as possibly adding uncertainty to the board
because of a move away from stereotypical gender roles. The countries that did not
mention gender in their codes had a mean UAI score of 67.8 compared to 58.4 for the
group that had gender recommendations.
The results for UAI and board independence are in direct contrast to the findings of Li and
Harrison (2008b). The group of countries that recommend a sufficient number of
independent board members had a mean UAI score of 68.6. However, the group that
required a majority of independent directors had a mean UAI score of only 57.8. This
suggests that allowing companies to determine their specific needs in terms of director
independence would be the preferred way to reduce ambiguity and uncertainty.
Countries with higher levels of UAI had codes that recommended board meeting frequency.
This group had a mean UAI score of 66.4 versus 57.8 for countries that have codes with no

PAGE 160 CORPORATE GOVERNANCE VOL. 17 NO. 1 2017

mention of meeting frequency. The need for guidance on meeting frequency could be viewed
as reducing uncertainty and providing much desired structure in a high UAI cultures.
As anticipated, the higher the UAI score, the less likely there would be a requirement to
separate the roles of CEO and Board Chair. However, the difference in the mean UAI
scores was not significant for the two groups based on CEO duality.

Conclusions
National culture, as defined by Hofstede’s cultural dimensions, influences the corporate
governance best practices recommended in country-specific codes. The four dimensions
of PDI, IDV, MAS and UAI were all found to relate to one or more of the elements of
corporate governance structure.
The recommended gender composition of the board is influenced by the cultural dimensions
of PDI, masculinity and UAI. The higher the scores on these dimensions the less likely the
corporate governance codes are to mention gender in relation to board composition.
Conversely, higher scores on the individualism dimension indicate an increased likelihood that
the code would make recommendations about gender diversity for board composition.
Recommendations for board independence were impacted by all four cultural dimensions.
Cultures with higher individualism scores were more likely to recommend that a majority of
board members should be independent. However, a recommendation of sufficient
independence was more likely in high PDI, masculine or UAI countries.
Surprisingly, national culture had little effect on the recommendations regarding CEO
duality. The tolerance of CEO duality was most likely in higher PDI countries. The other
three country culture dimensions were not significantly related to separation of CEO/chair
recommendations.
Finally, board meeting frequency was more likely to be mentioned in high PDI, masculine
and UAI cultures. Individualistic countries were less likely to mention frequency of
meetings, possibly allowing for companies to make individual decisions concerning the
number of board meetings.
One limitation of this study is that data were restricted to countries with codes available in
English. Further examination of these relationships in other countries would be needed to
enhance the significance of the results. Additionally, the cultural dimensions used in the
present study were those first identified by Hofstede (1980) excluding the two most recent
additions – long-term vs short-term orientation and indulgence vs restraint (Hofstede,
2001). Many of the countries where there were English translations did not have all six
scores available at this time. The decision was made to exclude these newest dimensions
to be more consistent with previous research and to provide consistency in this data set.
However, the long-term dimension has been directly linked with economic growth
(Hofstede, 2010) and would be interesting to assess when more values are available.
The implications for multinational companies as they expand into new cultures and
countries is clear. Just as “economic systems are not culture free”, neither are corporate
governance best practices. Hofstede argues strongly that “we cannot change the way
people in a country think, feel, and act by simply importing foreign institutions” (Hofstede,
2010, p. 24). Corporate Governance Codes allow a country to specify recommendations for
planning and control functions within organizations. Hofstede (2010) has stated that
national culture, especially PDI and UAI, will likely affect planning and control processes in
a country. This research supports this contention. And given that there is no evidence that
values of present-day generations from different countries are converging (Hofstede,
2010), persons involved with international business would be best served recognizing the
over-arching effects of national culture on organizational behavior and the corporate
governance codes that impact these organizations.

VOL. 17 NO. 1 2017 CORPORATE GOVERNANCE PAGE 161

 References
Aguilera, R.V. and Jackson, G. (2010), “Comparative international corporate governance”, The
Academy of Management Annals, Vol. 4 No. 1, pp. 485-556.

Bhagat, S. and Black, B. (1999), “The uncertain relationship between board composition and firm
performance”, The Business Lawyer, Vol. 54 No. 3, pp. 921-963.

Carrasco, A., Francoeur, C., Labell, R., Laffarga, J. and Ruiz-Barbadillo, E. (2015), “Appointing women
to boards: is there a cultural bias?”, Journal of Business Ethics, Vol. 129 No. 2, pp. 429-444.

Chan, A.W.H. and Chueng, J.Y. (2012), “Cultural dimensions, ethical sensitivity, and corporate
governance”, Journal of Business Ethics, Vol. 110 No. 1, pp. 45-59.

Daily, C.M. and Dalton, D.R. (1993), “Board of directors leadership and structure: control and
performance implications”, Entrepreneurship Theory and Practice, Vol. 17 No. 3, pp. 65-81.

Dalton, D.R., Daily, C.M., Johnson, J.L. and Ellstrand, A.E. (1999), “Number of directors and financial
performance: a meta-analysis”, Academy of Management Journal, Vol. 42 No. 6, pp. 674-686.

Daniel, S.J., Cieslewicz, J.K. and Pourjalali, H. (2012), “The impact of national economic culture and
country-level institutional environment on corporate governance practices: theory and empirical
evidence”, Management International Review, Vol. 52 No. 3, pp. 365-394.

DiMaggio, P.J. and Powell, W.W. (1983), “The iron cage revisited: institutional isomorphism and
collective rationality in organizational fields”, American Sociological Review, Vol. 48, pp. 147-160.

Ellstrand, A.E., Daily, C.M., Johnson, J.L. and Dalton, D.R. (1999), “Governance by committee: the
influence of board of directors’ committee composition on corporate performance”, Journal of Business
Strategies, Vol. 16 No. 1, pp. 67-88.

Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Cambridge University Press,
Cambridge, MA.

Gompers, P., Ishii, J. and Metrick, A. (2003), “Corporate governance and equity prices”, Quarterly
Journal of Economics, Vol. 118 No. 1, pp. 107-155.

Hermes, N., Postma, T.J.B.M. and Zivkov, O. (2007), “Corporate governance codes and their contents:
an analysis of Eastern European codes”, Journal for East European Management Studies, Vol. 12,
pp. 53-74.

Hickson, D.J. and Pugh, D.S. (1995), Management Worldwide: The Impact of Societal Culture on
Organizations Around the Globe, Penguin, London.

Hofstede, G. (1980), Culture’s Consequences: International Differences in Work-related Values, Sage,

Newbury Park, CA.

Hofstede, G. (1991), Culture and Organizations: Software of the Mind, McGraw-Hill, London.

Hofstede, G. (2001), Culture’s Consequence: Comparing Values, Behaviors, Institutions, and

Organizations across Nations, 2nd ed., Sage Publications, Thousand Oaks, CA.

Hofstede, G. (2010), Cultures and Organizations: Software of the Mind – Intercultural Cooperation and
its Importance for Survival, 3rd ed., McGraw-Hill, New York, NY.

Klein, A. (2002), “Audit committee, board of director characteristics, and earnings management”,
Journal of Accounting and Economics, Vol. 33 No. 3, pp. 375-400.

Li, J. and Harrison, J. (2008a), “Corporate governance and national culture: a multi-country study”,
Corporate Governance, Vol. 8 No. 5, pp. 607-621.

Li, J. and Harrison, J. (2008b), “National culture and the composition and leadership structure of
boards of directors”, Corporate Governance: An International Review, Vol. 16 No. 5, pp. 375-385.

Licht, A.N. (2001), “The mother of all path dependencies toward a cross-cultural theory of corporate
governance systems”, Delaware Journal of Corporate Law, Vol. 26 No. 1, pp. 147-189.

Meyer, J.W. and Rowan, B. (1977), “Institutionalized organizations: formal structure as myth and
ceremony”, American Journal of Sociology, Vol. 83 No. 2, pp. 340-363.

Sison, A.J.G. (2000), “The cultural dimension of codes of corporate governance: a focus on the
Olivencia report”, Journal of Business Ethics, Vol. 27 Nos 1/2, pp. 181-192.

Stafford, D. and Purkis, R. (1989), The Directory of Multinationals, Macmillan, London.

PAGE 162 CORPORATE GOVERNANCE VOL. 17 NO. 1 2017

Terjesen, S., Aguilera, R.V. and Lorenz, R. (2015), “Legislating a woman’s seat on the board:
institutional factors driving gender quotas for boards of directors”, Journal of Business Ethics, Vol. 128
No. 2, pp. 233-251.

Varner, I. and Beamer, L. (2008), Intercultural Communication in the Global Workplace, 5th ed.,
McGraw-Hill, New York, NY.

Yermack, D.L. (1996), “Higher market valuation of companies with a small board of directors”, Journal
of Financial Economics, Vol. 40 No. 2, pp. 185-211.

Corresponding author
Catherine Whelan can be contacted at: catherine.whelan@gcsu.edu

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com

VOL. 17 NO. 1 2017 CORPORATE GOVERNANCE PAGE 163